French PM: Aussie Subs to be built in Australia

French Prime Minister Manuel Valls said on Monday he was committed to building all of a new Australian submarine fleet in Australia, apparently contradicting the French contractor who said last week the deal would create jobs in France.

Valls stopped off in Australia while headed to New Zealand for a scheduled visit, just days after Prime Minister Malcolm Turnbull said France had beaten out Japan and Germany for the A$50 billion ($38 billion) contract.

Valls said he would personally oversee the drafting of the contract, one of the world's biggest defence deals, between France's state-owned naval contractor DCNS Group and Australia over the next few months.

"We would like to conclude as soon as possible this contract," Valls told reporters through an interpreter after meeting Turnbull.

"We will now deliver on all of our commitments .. the choice of the Australian contract was to have the 12 submarines built in Australia and that was the basis of our agreement."

Comments by DCNS chief Hervé Guillou last week that the deal would create about 4,000 jobs in French shipyards caused consternation in Australia, where the contract was heavily sold as a local build.

The deal will likely play a critical role in Australia's general election due on July 2, with it expected to shore up support for the ruling Liberal Party-led coalition in the state of South Australia where the bulk of benefits will flow.

The victory for DCNS underscored France's strengths in developing a compelling military-industrial bid, and was a blow for Japanese Prime Minister Shinzo Abe's push to develop defence export capabilities as part of his security agenda.

Japan, with its Mitsubishi Heavy Industries and Kawasaki Heavy Industries boat, had been seen as the early frontrunner, but their inexperience in global defence deals and an initial reluctance to say they would build in Australia saw them slip behind DCNS and Germany's ThyssenKrupp AG.

"Right from the beginning it was supposed to be a partnership that would create jobs right from the beginning, so it is a win-win partnership," Valls said.

DCNS' share of the overall contract to build 12 submarines will amount to about 8 billion euros ($9.02 billion), according to sources with knowledge of the deal.

Turnbull said the potential to transition the fleet into a nuclear-powered one was not a factor in the decision.

Australia is increasing defence spending, seeking to protect interests in the Asia-Pacific as the United States and its allies grapple with China's rising power.

 

By Jane Wardell